INESS - Institute of Economic and Social Studies - Analysis of the Social System in Slovakia

Below is a short summary of the Analysis of the Social System in Slovakia worked out by INESS in February 2006.

Due to the reform in 2003, the social system in Slovakia has undergone substantial changes. The state pension system was transformed into two pillar system and labor law was liberalized. Despite these facts, there are still many essential drawbacks in the system. INESS identified and described them in its Analysis of the Social System in Slovakia (which can be found in Slovak here). The major drawbacks are:

There is a lack of the clear goals in the social system. A conception, clearly defining the priorities, is missing.

Expenses of the social system are rapidly increasing and, due to the absence of measurable goals, it is impossible to evaluate its efficiency.

Meritoriousness – the exclusive goal of the social system should be solidarity with people in need. Social security is imitating private insurance and providing extent of merit, which should be the task of private sector.

Existence and wide spread of demogrants (universal benefits) in the social system. Demogrants are the main tool for social engineering. Expansion of demogrants causes transfer of resources from their productive use in private sector into insufficiently defined and hardly controllable goals.

Social system is too complex. The consequence is high cost of administration and lack of transparency. The same social problem is often being solved by two or more parallel social benefits.

Wrong setting of the social payments (the trap of unemployment and the trap of inactivity) combined with high payroll taxes and the existence of minimum wage eliminate the motivation of unqualified and unemployed people to work and act as an effective barrier in creating low cost jobs. This results in the long term high unemployment rate, the source of considerable fiscal burden and poverty.

Increasing deficit of the public pension system.

Main task of the public social system should be to help people in real need. Meritoriousness should be left to the private sector, which is far more efficient in its providing. Eliminating of state activities in the wide scope of social affairs will decrease the costs of the public social system. This is the way how to decrease redistribution of wealth, which leads to higher economic prosperity and increase in wealth of society.